Active Investing vs. Passive Investing — Which Is Better?

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In investing, the two most basic things you need to decide when it comes to your portfolio strategy is whether you want to be an active investor or a passive investor.

Let’s look at what these two choices mean and which might be the best one for you…

Active Investing

If you are an active investor, you naturally want to make returns that are better than the market average, otherwise what’s the point of investing actively?

To do this, you are going to have to analyze and evaluate every stock that goes into your portfolio.

This may seem like a lot of work, but the potential for major profit is there.

The idea with this strategy is that you will be uncovering smaller (but still valuable) companies that large investment firms overlook.

The reason they do this is because they are focused on investing billions of capital and analyzing small companies just isn’t worth the time and effort for the return a large hedge fund requires.

The most popular strategy that active investors take (that I believe is totally wrong) is day trading or making frequent trades.